The Divine Right of Capital

Dethroning the Corporate Aristocracy

by Marjorie Kelly

Berrett-Koehler Publishers, 2003, paperback

The Divine Right of Capital exposes the fundamental ills of the corporate system.
Marjorie Kelly argues that focusing on making profits for stockholders to the exclusion of
everyone else's interests in a form of discrimination based on property or wealth. She shows
how this bias is held by our institutional structures, much as they once held biases against
blacks and women.

Why is it taken for granted that stockholder earnings are the proper measure of a company's
success? Wouldn't the rising incomes of employees be a reasonable measurement? Kelly points
out that although stockholders supposedly "fund" corporations, most invested dollars remain
in the speculative market and don't reach companies.

Praise for The Divine Right of Capital

"Brilliant. So simple. So direct. And so beautifully written. I think we have found our
Thomas Paine for the new millennium." --David Korten, author of When Corporations Rule
the World

"The book brims--actually spills over-- with unsanctioned ideas and imaginative new directions.
The strength of Kelly's case is that it demonstrates that structural changes in business,
far from being radical, are grounded in the founding ideals of America."--From the Forward
by William Greider, author of One World, Ready or Not

"A marvelous piece of work--clear, concise, and beautifully written. It raises all the right
questions with insight and provocative observations."--Dee Hock, Founder and CEO Emeritus,
Visa International

Quotes from The Divine Right of Capital

"I myself am a small business owner, as were my father and grandfather before me.
As a business publisher and journalist, I have seen that a democratic evolution in business
has been trying to happen for some time--with growing attention to environmental stewardship,
employee profit sharing, family-friendly policies, and good corporate citizenship. Fourteen
years ago, I cofounded the publication Business Ethics to support this rise in corporate
social responsibility, believing that voluntary change by progressive businesspeople would
transform capitalism. I no longer believe that."

"After more than a decade of advocating corporate social responsibility and seeing
its promise often thwarted, I've come to ask myself, What is blocking change? The
answer is now obvious to me. It's the mandate to maximize returns for shareholders, which
means serving the interests of wealth before all other interests. It is a system wide mandate
that cannot be overcome by individual companies. It is a legal mandate with which voluntary
change can't compete.

"This mandate, quite simply, is a form of discrimination: wealth discrimination. It
is rooted in an ancient, aristocratic world view that says those who own property or wealth
are superior. It is a form of entitlement out of place in a market economy.

"We can move to a true market economy, where all economic rights are equally protected,
and where all persons are equally empowered to pursue self-interest. We can design new economic
structures--new ways to hire CEOs, new financial statements, new concepts of fiduciary duty,
and new forms of citizenship in corporate governance--that embody both democratic and market
ideals.'--pp. xii-xiii

. . .

"We might note that while employees and the community are left to the protection of the
invisible hand, wealth is protected by the visible hand of government and corporations. But
this is something, it is hoped, that will be overlooked.

"To help us begin to see it, we might, for a moment, imagine a different arrangement of
institutional power. Picture a free market in which labor rights are enthroned in law, and
property rights are left to the invisible hand. This would be a world in which we believe
employees are the corporation. They are, after all, the ones running the place.
Hence only employees could vote for the board of directors, and the purpose of the corporation
would be to maximize income for employees. In theory, stockholders would receive income they
negotiated through contracts. In practice, the corporation would dictate those contracts
with little real negotiation, and stockholders could accept the terms or go elsewhere, only
to find other corporations offering nearly identical (and dismal) terms.

"In this world, stock would be sold in a manner controlled entirely by the corporation,
much as wages are set today. Stockholders would appear alone at the company, where they would
be taken into a room and made an offer. There would be no reliable way to compare current
stock price to past price, to compare the price one person receives to what others receive,
or to compare prices from one corporation to another. Wage and benefit data would be published
daily in the Main Street Journal, and the movement of the Dow Jones wage index would
of course be tracked nightly on the news. But returns to shareholders would be considered
proprietary information and would not be given out.

"If stockholders tried to improve their negotiating position by organizing into mutual funds,
corporations would threaten to cut off payments altogether. The companies would talk about
replacing stockholder money with funds from people overseas who were willing to accept lower
returns.

"And of course overseas, stockholders would have even less power. Although free trade agreements
would provide intricate protections for labor and environmental rights, they would offer
capital no protections. 'What does capital have to do with trade?' pundits might ask. 'Trade
is about goods and services and the people who create them, it's not about capital.'

"When the newspapers said 'the corporation did well,' they would mean that employees did
well. Stockholders might have seen no dividend increases in years. Some might even have seen
their income terminated in 'capital layoffs.' But whenever anyone dared to suggest changes
in this economic order, they would be said to be 'tampering with the free market.'"--pp.
77-79.

. . .

"The notion of economic sovereignty is worth examining a bit, for there's more to it than
voting rights. We might note, for example, that it has both an internal and an external component,
as masculine political sovereignty once did. In an earlier age, men held power both inside
the family and outside it, in society--their sovereignty was internal and external to the
family. In like manner, economic sovereignty is internal and external to the corporation.
Internally, stockholders are sovereign because the corporation is said to be private. Externally,
they are sovereign because the free market must self-regulate

"Inside the corporation, stockholder sovereignty is manifest in the notion that rising income
for stockholders is good, while rising income for employees is bad. Externally, capital sovereignty
is manifest in, for example, Federal Reserve policy, which similarly views wage gains as
bad (that is inflationary), while it views stock market gains, for the most part, as good
(they are not counted indirectly in measures of inflation). As long as stock market gains
don't overheat the consuming economy, they are limitless. But labor must be kept in its place.
If wages were to triple, the Federal Reserve would go berserk. But the stock market tripled
in a matter of years, and the Fed considered the economy healthy. That's economic sovereignty.
It's a question of whose interests are considered one with the health of the economy." p.85

. . .

"Stockholders, as the body politic, can do no wrong. Certainly they bear no responsibility
for what the corporation does wrong, due to the doctrine of limited liability. And however
ruthless the actions they require--closing factories, clear-cutting forests--those actions
are right. The stockholder body politic 'is not only incapable of doing wrong, but
even of thinking wrong.' Like fictions about the king, corporate fictions serve
a single purpose: to protect current arrangements of power." --pp. 90-91

Table of Contents of The Divine Right of Capital

Forward by William Greider

PART I - Economic Aristocrats

The Sacred Texts
The Principle of Worldview

Lords of the Earth
The Principle of Privilege

The Corporation as Feudal Estate
The Principle of Property

Only the Propertied Class Votes
The Principle of Governance

Liberty for Me, Not for Thee
The Principle of Liberty

Wealth Reigns
The Principle of Sovereignty

PART II - Economic Democracy

Waking Up
The Principle of Enlightenment

Emerging Property Rights
The Principle of Equality

Protecting the Common Welfare
The Principle of the Public Good

New Citizens in Corporate Governance
The Principle of Democracy

Corporations are Not Persons
The Principle of Justice

A Little Rebellion
The Principle of (R)evolution

About Marjorie Kelly

Marjorie Kelly is the cofounder and publisher of Business Ethics,
a national publication on corporate social responsibility based in Minneapolis. Kelly's writing
has appeared in many publications, including The Utne Reader, The Progressive
Populist, Lapis, Tikkun, Earth Island Journal, and Hope magazine, well as in
a weekly column in the Minneapolis Star-Tribune.